Extension of the bond term as a solution to help businesses balance resources

	Developing a transparent, healthy, fair and sustainable stock market: Minister of Finance
	Capital market suffers from difficulties, businesses expect to access new capital mobilization channels
	Revised Decree 65 to be submitted to Government early next week

The Decree amending Decree 65/2022/ND-CP removes difficulties in the liquidity of the economy and enterprises. Photo: Internet.

According to the Ministry of Finance, the promulgation of the Decree aims to resolve difficulties in the liquidity of the economy and enterprises, readjust the corporate bonds, and enterprises can balance capital sources for business production

Regarding the medium and long-term orientation, to develop a transparent and sustainable corporate bond market, it is necessary to have a roadmap to implement regulations in Decree 65 and revise regulations on professional securities investors and requirements on the issuance of privately placed corporate bonds in the Law on Enterprises and the Law on Securities.

Some notable amendments of the draft decree are the suspension of effect until the end of December 31, 2023, for regulations on determining the status of professional securities investors in Decree 65; suspension of the effect of regulations on compulsory credit rating and reducing the time of bond distribution in Decree No. 65 until the end of December 31; allowance of previously issued bonds to be negotiated to change terms and conditions, to extend the maturity of the bonds and to convert principal and interest payments into loans and other assets...

Regarding the proposal to suspend one year-implementation of the regulations on determining the status of professional securities investors in the draft, the Ministry of Planning and Investment said that this regulation is necessary. However, the number of investors who meet all the conditions for professional securities and the number of investors who have not satisfied regulations on 180 day-portfolio holding period.

The Ministry of Finance cites the Securities Law 2019 as saying that there are many methods to determine the status of professional securities investors, and investors must meet one condition of each type to become a professional stock investor.

For individual investors, in addition to determining their status by securities portfolio, investors can also be determined by taxable income and securities practice certificates.

Currently, regulation on information on professional securities investors has not been issued—only a national database of residents managed by the Ministry of Public Security. Therefore, as suggested by the Ministry of Planning and Investment, there is no basis for compiling data on eligible and ineligible investors. In addition, the National Financial Supervisory Commission and the Vietnam Bond Market Association also agreed to suspend the effect within one year of the regulations on determining the status of professional securities investors, compulsory credit rating and reducing bond distribution time.

Regarding the change of the bond's term, the State Bank has suggested specifying the regulation on the bond extension in the long term or a temporary solution, whether the issuer and the investor are allowed to extend the interest payment term.

The State Bank proposed to provide an impact assessment on investors because it may affect the sentiment of investors who did not agree to change the conditions and terms of the bonds and asked to supplement regulations. After all, the extension of bonds will change the provisioning and debt classification for the bond investment amount of credit institutions and securities companies.

According to the Ministry of Finance, the regulation on extending the issued bond term

is a short-term solution in the context that enterprises face difficulties in balancing resources to repay debts while the volume of matured bonds will hit its peak in 2023-2024. Therefore, the draft Decree stipulates extending the term of issued bonds to a maximum of two years.

In addition to extending the principal repayment period, the issuer may negotiate with investors on the method and term of interest payment, change in collateral or other bond conditions. Accordingly, the draft Decree supplements provisions allowing the change of conditions and terms of the bonds.

Minister of Finance Ho Duc Phoc said that the provisions of Decree 65 are appropriate, but in the context of the difficult market, the Decree amends the time limit for applying some regulations to support the supply and the demand sides in the privately placed corporate bond market.

For the long-term solution, the ministry has directed units to review relevant regulations and work with other ministries and sectors to revise regulations on enterprises, banking, and monetary.

The ministry has also asked units to advise solutions to submit to competent authorities for consideration and adjustment of regulations to be consistent with the reality of the market.

The Minister also said that the Ministry of Finance had requested units to strengthen supervision and inspection for issuers and service providers such as securities companies, auditing companies, etc., as well as strengthen coordination with relevant ministries and sectors to agree on solutions to support the corporate bond market to develop effectively.

The allowance of the extension of bond maturities will help disperse corporate bonds that will mature in 2023-2024.

According to the assessment of economic experts, Vietnam's economy will continue to maintain the current growth momentum in the next period. Accordingly, in 2025-2026, businesses will solve the difficulties in liquidity and debt structure.